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Sen. Tim Scott is aware that legislation he helped get passed into law could put his name in the history books if it manages to deliver on the promise of bringing investment to poverty-stricken areas like the North Charleston neighborhood he grew up in.
The South Carolina Republican is also aware that hedge funds and other wealthy investors are circling around the funds that were created through the 2017 Tax Cuts and Jobs Act.
And that’s fine, since those businesses are where the money will come from. But Scott said he’s determined to make sure that investors don’t exploit these neglected communities, and that the long-time residents of these areas benefit too, in part by being able to stay put as money pours in, rather than being displaced.
“Scrutinizing the results, and who’s benefiting, is essential in making sure that the program is successful. I’d rather stop the program if nefarious behavior becomes the norm, as opposed to continue the progress because there are slivers of opportunities being increased,” Scott said in an interview on the Yahoo News podcast “The Long Game.”
“I am a person who was one of the folks left behind. My goal is to make sure that there are fewer people left behind,” Scott said.
Scott, 53, who became the seventh African-American senator in U.S. history in 2012, began pushing what are known as “opportunity zones” in 2016.
Scott hopes his iteration will do better. Opportunity zones offer investors the ability to postpone paying capital gains taxes on the sale of an asset as long as they reinvest it in a fund that is creating new opportunity in a zone designated by a local authority, such as a mayor. The total tax paid can also be reduced if the money stays invested for several years, and there will be no capital gains tax on the return from the investment in the zone itself.
Jared Bernstein, a prominent liberal economist who served as chief economic adviser to Vice President Joe Biden in the Obama administration, was cautiously optimistic about Scott’s bill.
“The most direct ways to help those left behind is to guarantee them jobs, incomes, housing and health care. The direct way to improve infrastructure in poor neighborhoods is for public projects to build it,” Bernstein wrote. “But the fact is that most [opportunity zone] communities have faced disinvestment and depopulation for so long, they have both the need and capacity to absorb new investment, development and people without displacing local residents. I suggest we give [opportunity zones] a chance, while scrutinizing their progress.”
And the potential impact is massive.
“They’re set to become the biggest economic development program in the country — more than Low-Income Housing Tax Credits (LIHTC), New Markets Tax Credits (NMTC), or even Community Development Block Grants (CDBG). It’s estimated that there could be up to $2.2 trillion invested in Opportunity Zones,” wrote Brianne Nadeau, a member of the Council of the District of Columbia.
Nadeau, however, is skeptical that the program will be effective.
“At the heart of the issue with the program is its adverse incentive structure. Though Opportunity Funds have to invest in certain areas, the primary incentive is still a return on capital, and there are virtually no stipulations that their investment has to support programs or construction that actually benefit the residents of the zones, or prioritize things like affordable housing,” she wrote.
Scott, however, said keeping residents from being displaced will happen “very easily when you have the municipalities engaged in the process.”
“What we see is an opportunity for cities through zoning, and through incentives, through grants, through infrastructure, to control the type of development that happens and to control the pace of that development,” Scott told Yahoo News. “There are other controversial measures, whether it’s assessment caps that would slow down the acceleration in the property values that so often run people out of the neighborhoods. There is a way in local government to cap those assessments. I’m not saying I support those, I’m just suggesting that there are a number of initiatives that can be taken on by local government.”
Download or subscribe on iTunes: “The Long Game” by Yahoo News
The story of how opportunity zones came to be is a fascinating one. It starts with the horrific white supremacist rally in Charlottesville, Va., in August 2016, and President Trump’s response, in which he claimed that there were “very fine people” on both sides, describing a rally that pitted neo-Nazis and neo-Confederates chanting anti-Semitic slogans against counterprotesters.
Scott spoke out against Trump’s comments. That was the kind of thing that many had been wanting Scott, as one of only two African-American senators at the time, to do for a long time.
But Scott is caught between dual pressures as an African-American Republican in a Southern and very conservative state. Many would like to see him advocate more aggressively and consistently for issues of concern to the African-American community, especially in the Trump era. But Scott’s base is largely comprised of white Republicans who are Trump supporters.
Nonetheless, Scott had begun to speak on race in a new way prior to Charlottesville. A year before, in fact, he went to the floor of the Senate and spoke about his emotional reactions to the killing of unarmed African-Americans by police officers.
“I shuddered when I heard Eric Garner say, ‘I can’t breathe.’ I wept when I watched Walter Scott turn and run away and get shot and killed from the back. And I broke when I heard the 4-year-old daughter of Philando Castile’s girlfriend tell her mother, ‘It’s OK. I’m right here with you,’” Scott said.
Scott, to bring the point home, described in great detail his own experiences with being targeted by police officers for no other reason than that he is black.
“While I thank God I have not endured bodily harm, I have, however, felt the pressure applied by the scales of justice when they are slanted. I have felt the anger, the frustration, the sadness and the humiliation that comes with feeling like you’re being targeted for nothing more than being just yourself,” Scott said.
So when Trump made his comments about “very fine people on both sides” at Charlottesville, Scott was ready to speak up. He called the president’s comments “indefensible” and said Trump had “compromised” his moral authority.
That prompted a call from the White House, asking Scott to meet with Trump to talk about the issue. There, Scott said, he talked the president through issues of racial discrimination and explained why he found the response to Charlottesville so offensive.
“What can I do to be helpful?” Trump asked Scott, according to the senator.
“I said, ‘Sir, Mr. President, if you would take a look at, and perhaps support, my opportunity zone legislation that brings private capital back to the most vulnerable neighborhoods, it would be tremendous,’” Scott said.
Trump’s public endorsement of the legislation the next day “gave me the type of margin necessary in my own party to keep that legislation embedded in the tax code,” Scott said.
“Ultimately, this wasn’t about me. I am a United States senator, it’s kind of hard to cry too much about the challenges when you are at this place,” Scott said. “But I should validate the challenges of most Americans’ experiences, especially people of color. Specifically, people who are black.”
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